Recovery of TDI Production Capacity in Europe: Doubling of China's Export Volume Conceals the Risk of Overcapacity

Recently, Covestro announced that it has successfully completed the modernization of its TDI (toluene diisocyanate) plant in Dormagen and officially put the plant into operation. This plant is the largest TDI production facility operated by Covestro in Europe, with an annual production capacity of 300,000 tons, and it uses the gas-phase technology developed by Covestro. The energy consumption of the renovated plant is 80% lower than that of traditional processes, and it can reduce carbon dioxide emissions by 22,000 tons per year.

In December 2023, Covestro announced that it would invest tens of millions of euros in the modernization of its 300,000-ton-per-year TDI plant in Dormagen, Germany, with the project expected to be completed in 2025. The successful modernization of Covestro not only strengthens the plant's market position in the context of high energy costs but also significantly enhances the competitiveness of TDI production in Europe. It also provides customers with TDI products with a lower carbon footprint. Covestro has also set a goal to reduce the carbon dioxide emissions per ton of product generated from energy use by 20% compared to 2020 by 2030. The upgrade of Covestro's European plant this time also marks that TDI production is transitioning from the traditional high-energy-consuming model to a greener and more efficient one.

There are only two remaining TDI producers in Europe, Covestro and Wanhua BC, with a combined production capacity of only 550,000 tons, accounting for 16% of the global total production capacity. In recent years, affected by energy costs and environmental protection policies, overseas TDI production capacity has been continuously shrinking. BASF shut down its TDI and precursor units at the Ludwigshafen site in early 2023; Japan's Tosoh also stopped its TDI production (approximately 25,000 tons per year) at the Nanyo site in Japan in 2023. Argentina's Petroquímica Río Tercero shut down its TDI plant in Córdoba with a production capacity of 28,000 tons per year in October 2024.

The global TDI production capacity is concentrating in China. Currently, China's TDI production capacity accounts for 48% of the global total production capacity. In the future, with the expansion and commissioning of new plants such as Wanhua Fujian (Phase 2), Wanhua Xinjiang, Covestro Shanghai, and Hualu Hengsheng, China's TDI production capacity is expected to reach 2.4 million tons.

Capacity Expansion by Covestro and Wanhua Accelerates Global TDI Capacity Growth

It is understood that the 360,000-ton unit of Wanhua Fujian (Phase 2) is expected to be tested in April or May 2025; the 128,000-ton unit of Mitsui Chemicals MCNS in Omuta will be reduced to 50,000 tons from May to July 2025; the TDI unit of Covestro Shanghai is planned to be technically upgraded to 370,000 tons by the end of 2025; the technical upgrade of Wanhua (Xinjiang) to 250,000 tons is expected to be put into production in the third quarter of 2025, and the supply side is expected to increase by 400,000 tons.

Looking at the price trend in 2025, prices increased slightly in January and February, but they continued to decline in March. As of March 25, the mainstream price in East China, China, dropped to 11,700-12,000 yuan per ton. Affected by the general environment, the overall demand from end-users is worse than in previous years, and the consumption rate of raw materials has decreased. Some small factories are even in a poor operating state. Especially in the second quarter, under the expectation of new capacity launches, the imbalance between supply and demand is difficult to be substantially improved, and the TDI market is still far from optimistic.

From the import and export data, China exported 77,600 tons of TDI from January to February 2025, an increase of 87.7% compared with the same period in 2024. The increase in exports has alleviated the excess production in China. After March, some units were temporarily shut down, reducing the pressure of excess supply. It is expected that the increase in exports in the second quarter will still be sustainable. Especially after the commissioning of the second-phase unit in Fujian, China in May, China's supply will increase. Mitsui Chemicals in Japan will shut down some production capacity, and other overseas units also face the risk of production reduction due to cost pressure, creating a certain gap in the overseas market. Chinese producers will continue to maintain their export enthusiasm.